How Do We Become Number 1 Exporter In Gems & Jewellery ?
After PM Narendra Modi’s pep talk about ‘Design in India’ and how India should be Number One in gems and jewellery, Indian exporters are all geared up to hit $60 billion worth of exports in the next 5 years. Given the current climate, this could be a tall order. There is no dearth for inspiration in this country that has had a longstanding heritage when it comes to craftsmanship. We have a strong foundation in jewellery manufacturing and the industry currently employs 4.5 million skilled and semi-skilled workers across India, but we are meeting only 10 per cent of the global demand. If our forte lies in jewellery making, why is India not playing to its strength? Where is the industry lacking and what should it be doing to be on top? Explores Vijetha Rangabashyam
Off late, there has been much talk about India rising to the occasion; we have a 60 per cent market share in the global diamond market, why not we reach for the sky with gems and jewellery too? Speaking at an inauguration of a diamond polishing unit in Surat recently, PM Modi said, “We have become a diamond in diamond cutting. But now we have to be number one in gems and jewellery, and not only ‘made in India’ jewellery, but ‘designed in India’ jewellery needs to be popularised across the world.” Our history with jewellery manufacturing is several centuries old and the reason why we have woken up to promoting jewellery export quite so late remains to be unanswered. “In 1997, Italy’s share was 36 per cent in global jewellery and India’s share was 0.5 per cent. Today from 36 per cent Italy has come down to 12-14 per cent and from 0.5 per cent we have gone to 14 per cent. We have done phenomenally. In 2013, at the Sparkle Jewellery show, I was the guest of honour and Narendra Modi the then the CM of Gujarat was the chief guest. In his speech he said, “stop export of diamonds.” After a big pause he said, “start exporting your diamonds studded into jewellery.” But on April 19th this year, what he said was a step ahead, a phenomenal statement he made, “start exporting diamonds studded into jewellery by our own artisans and our own designs,” says Pankaj Parekh, Former Vice Chairman, GJEPC.
In February, the GJEPC compiled a report that indicated a sharp decline in gold jewellery export at Rs. 2810.60 cr as opposed to Rs 5,355.47 cr last year. We are suffering severe competition from the likes of China not to mention the increase in jewellery manufacturing units in the UAE; many of these manufacturing facilities are shifting bases to the UAE and with this we are losing almost 20 per cent in the total jewellery export. “We are a very design-oriented industry. China deals with mass production and it is not a competition for us and Turkey has its own problems internally. We cater a lot to the UAE because they prefer 22 carat jewellery like us Indians. To reach other markets, we should focus on diamond studded jewellery, which is our strength,” says Vikram Jain, Director, Kanakratna.
While the 10 per cent import duty on gold that has been brought in to create jewellery may be a valid reason for this decline, it can’t be the only reason. The industry doesn’t have what it takes to meet the global tastes when it comes to jewellery designs and we are lagging behind in skill to make light weight jewellery. Hence we are losing out to players like Italy, Turkey, Germany and Hong Kong, and more importantly, we need to look beyond the UAE and other Indian dominated countries to export gold jewellery.
World gold demand
Gold has long been an auspicious metal, a vital aspect of celebrations and festivals in many cultures. It is viewed as an integral investment by people from various countries. According to a Gold Survey report furnished by Thomson Reuters, India and China are at the top when it comes to gold consumption. In the second quarter last year, both the countries accounted for 44 per cent of gold jewellery consumption and the demand for gold bars were also highest in these countries. The demand was higher than what one could find in the US, Europe, South America and Africa combined. The demand in India however dipped in second quarter due to a sharp jump in gold price, dull rural incomes and government regulations.
Gold demand in China weakened too owing to a massive change in consumer tastes and a dull economy. World Gold Council reported, “A shifting preference for fashionable, unique, highly-designed 18k or gem-set pieces has come at the expense of traditional 24k jewellery. This trend may continue, given the younger profile of 18k gold jewellery customers as highlighted by our consumer research. Our survey showed that, of the more-than 1,000 respondents who had bought gold in 2015, 18–30 year olds were more likely to buy 18k jewellery than 24k (3per cent vs 25 per cent).” The last quarter witnessed a dip in gold demand globall by 27.5 per cent but a few countries enjoyed an increase in demand like Iran (12 per cent), the United States (12.4 per cent), Canada (11 per cent) and Saudi Arabia (2.4 per cent).
Current export scenario
In 2015, total jewellery exports amounted to US $97.7 billion, a good 18.4 per cent increase from 2011. China accounted for US$18.6 billion, 19.1 per cent of total jewellery exports in the world in 2015. This was followed by Switzerland amounting to $11.1 billion, forming a 11.3 per cent share in the global exports of gold jewellery. Since 2011, the fastest growing countries as far as jewellery export is concerned are Turkey (up 92.7 per cent), China (up 85 per cent), Switzerland (up 60.4 per cent) and France (up 54.7 per cent). The countries that displayed a steady decline in export of jewellery were the UAE ((down -77.2 per cent), India (down -30.5 per cent), Japan (down -24.4 per cent) and Malaysia (down -7 per cent).
Where is India in all this?
Indian gold jewellery shipments amounted to US$ 43156.21 million in FY 2016-17 (provisional) and more than 50 per cent of the demand came from the UAE. The Indian gems and jewellery sector entails of cut and polished diamonds, gold jewellery, gold medallions, rough diamonds, gemstones, pearls, synthetic stones and fashion jewellery and out of this cut and polished diamonds account for 53 per cent while gold jewellery accounts for 20 per cent. Exports of cut and polished diamonds during is at US$ 22783.81 million while gold jewellery export is at US$ 8721.81 million. India exported gold jewellery to 90 countries including USA, UK, UAE, Hong Kong and Singapore, with UAE being India’s largest consumer. Gold Jewellery studded with diamonds at US$ 3499.46 million constitute 40 per cent of total export of gold jewellery at US$ 8721.81 million during 2016-17. Gold Jewellery studded with diamonds is mainly exported to USA, Hong Kong, Australia, France, Canada & Belgium, UAE, Singapore and Malaysia are the major markets for plain Gold Jewellery Exported from India. The Indian jewellery industry plans to invest Rs. 100 Cr over the next few years to promote branded jewellery internationally. “We have improved a lot. We are ahead of many countries and managed to grab a good amount of market because of the Modi wave, liberalization and the Make in India campaign,” says Raman Solanki, Director, Sangam Jewels.
Skill shortage & lack of young talent
Like in many countries, gold holds a special place in Indian culture. From time immemorial, jewellery is ingrained in our culture, backed by intricate Karigari and traditional designs. There are even references of jewellery pieces that possessed magical powers in Hindu mythology. We are one of the world’s largest consumers of jewellery and we also have a thriving jewellery manufacturing industry. “We have a huge manpower and we take pride in traditional craftsmanship which is not available anywhere else in the world,” says Kirit Bhansali, Chairman, Indian nstitute of Gems and Jewellery. Yet, the Indian gems and jewellery industry is still to a large extent unorganized and fragmented, backed by cheap labour – as of 2013, 70 per cent of jewellery processing in India was done manually. There has been very little investment that has gone into machinery and automation in jewellery manufacturing.
Only now, there has been talk about investing in state of the art manufacturing units. Though there has been a significant growth in gold jewellery demand in countries like the US and Europe, the market still prefers light weight jewellery in 8-10 carat gold, which requires higher automation and innovation and additional skilled work force, which at present, the industry is in dire need of. The gems and jewellery industry may be one that is driven by employment, but it is important to note that a majority of these employees are low-skilled. “It is very important that we improve the quality and productivity of our skilled artisans. We have to train the artisans to use modern machinery and make them understand the level of quality people are expecting all over the world. Unless we set a benchmark, things will not improve,” says Premkumar Kothari, Chairman, Gem & Jewellery Skill Council of India.
The skill development process is disorganized where most workers are trained on the job; they don’t come with predisposed knowledge which in turn results in long durations of training. There are too few workers who can use CAD (design software) and they are not trained enough to think about creating designs that will appeal to the international markets. Processes such as soldering and plating require the use of latest machines and techniques and a majority of the current crop of workers are not familiar with such equipment. The gems and jewellery industry also fails to garner younger talent because of working conditions that are not particularly conducive – jewellery manufacturing units are small and some places have artisan working without fans in order to prevent the loss of gold. These units have not advanced in time and this combined with low salaries has resulted in a lack of young talent joining the industry.
Inaccessibility of good education
There are comprehensive courses available in jewellery design and manufacturing techniques and CAD/CAM technology but most of these courses are highly expensive for the lower-income segment and most of the workers are from the rural side of the country, who are primarily wage earners. For instance, a 3-year diploma in jewellery design and manufacturing is close to Rs 4 lakh and this is a figure beyond means for the working class people. Short term courses in gemology and diamond grading also range anywhere between Rs 35,000 – Rs 70,000. Accessibility of such courses is again an issue considering most of these courses require the participants to be living in cities and are not available remotely. “Under our PM’s new initiative PMKY, if a student undergoes any training we impart which has been recognized by the gem and jewellery skill council and if the student gets certificate after finishing the course, then the government pays a subsidy to the student. This is a great initiative,” says Mr. Kothari. But the subsidy is paid only after the completion of the course and the loan repayment capacity from the workers’ end is also very weak.
Only now, The Indian Institute of Gems & Jewellery (IIGJ) is opening branches in Varanasi and Udupi to help create career opportunities and promote the jewellery sector in those areas. Still, accessibility of education when it comes to the jewellery sector is a cause for concern. “We have several branches of IIGJ now. We recently started one in Varanasi and we are opening one shortly in Udipi. The new generation is taking a lot of interest in jewellery these days. They are getting educated abroad like in U.S and China whereas those days we were relying only on the babus. Also we are adopting new technology and machinery now,” says Bhansali.
Backward in technology & innovation
For an industry like jewellery which heavily relies on skill, lapping up the latest in technology and being abreast with global trends are mandatory. On the one hand, good designs will attract global audience and on the other, for such good designs to materialize, technology becomes indispensible both for productivity and quality of the finished product. “We Indians don’t mind wearing earrings which have screws that are slightly rough. Whereas the westerners have softer skin and they are used to comfortable jewellery which can only be made with machinery in very thin post. So we have to tell our artisans to improve their performance. It is not rocket science. In India nothing is nonsellable. But in International market, if a product’s finishing is not proper, they will not even buy it for free,” says Parekh.
The tastes of consumers are evolving both domestically and internationally, while the Indian Karigaris are familiar with traditional designs, they are not adept in adopting modern designs which is causing a huge setback in the export market. Even at the domestic level, people are increasingly leaning towards lighter jewellery influenced by western countries. Indian jewellery industry is constantly outranked by the likes of Thailand and Turkey where the quality of the finished product is far superior. World over, consumers are becoming well aware of quality and standardization in the products they buy and especially with jewellery, because of its sheer value, quality becomes a nonnegotiable factor. The industry’s inability to meet the global demand because of a lack of design innovation and age-old technology is a growing concern. For instance, jewellery moulds are created manually, as opposed to using technology like CAD. Jewellery designs are still laid out in paper in smaller, unorganized units which is a time consuming process. The jewellery again is assembled manually (soldering) and grinding machines are hardly used. “There is lot of apprehension about purity of gold when oversees customers wants to buy from India. Whenever a new customer wants to buy gold from India, they have doubts about the credibility of an Indian manufacturer. We need to come up with a mechanism through the Gem and Jewellery Council of India, like a central body which can mediate if there is any problem for a customer who has bought a product from India,” says Kothari.
What should the industry do to be number 1?
The good news is that we are still one of the biggest exporters of gems & jewellery in the world. In the last decade, the industry has exported to 160 countries and the gems & jewellery sector is undoubtedly a major contributor towards India’s foreign exchange earnings. But the bad news is that we are going about it in a very haphazard fashion. A majority of the jewellery that are exported are unbranded, they are later branded and sold as international brands. “Because of government policies abroad there was a huge tax on Indian jewellery import. Now that is slowly changing with various governments. Many countries are now ready to reduce the duty structure and once that has been implemented we will be able to market our jewellery brands to many countries,” added Bhansali.
We need to shift focus from exporting unbranded jewellery to branded jewellery and that is the need of the hour. ““We can say that Amrapali is the Cartier of India. But it takes time to build a brand and the Indian market does not have the patience. We like quick turnovers and profits and hence we like to cater to a mass market,” says Mr. Jain. There is also a critical need for the industry to organize itself and completely embrace best practices. Ironically, we have the manpower but we lack the skill and we have the designs but we don’t have the technology to support it. A majority of our exports come from countries such as UAE and even the US to some extent where there is a dense Indian population, but we are grossly losing out on markets such as Europe, UK and Japan. A structured approach towards skill and infrastructural development will be highly beneficial towards expanding our market share when it comes to exports. Focusing on fashionable, light and hollow ewellery is the only way forward. “With marketing we can change the opinion of people. We as a country should market Indianmade jewellery, with Indian motifs with peacock, etc, which are neutral,” adds Parekh.
The sector by and large includes small, independent players who don’t have the wherewithal to produce high-fashion, quality jewellery. Stakeholders and bigger players should actively engage in supporting the smalltime jewellers in creating jewellery that meets global standards. Currently jewellery manufacturing pockets are found in Jaipur, Coimbatore, Surat, Mumbai, Hyderabad, Delhi etc, and AT Kearney in a report suggests that creation of shared facilities in such places would help boost the workers’ productivity owing to better working conditions. “I would suggest to the Industry, we must first increase our production of jewellery and resist from selling diamonds only. Yes from 0.5 per cent we have come a long way but we have grown out of compulsion not out of innovation. Our target should be not just to offload diamonds. With just diamonds the cycle is very short but with jewellery making, the process becomes longer. People prefer doing these short cycles. Instead of that, as a country, we have to promote manufacturing of jewellery and not just raw material,” says Parekh.
There needs to be a definitive way to attract more young talent into the industry and the only way to do this is to change the perception of the industry being unorganized. Jewellery design and manufacturing course modules need to be relooked and restructured keeping in mind the demand from the global front. “The skill council has developed a standard which has been approved by major factories in India. Based on this we have developed a curriculum through which we are imparting training. Once this has been implemented thoroughly, we can compete with any country,” says Kothari.
We need to borrow a leaf out of Turkey, which had a similar, fragmented jewellery industry in the 90’s. In a case study: Learning from the Transformation of the Jewellery Industry in Turkey it is reported that Jewellery clusters were created to sharpen focus on technology adoption, aided through the formation of a dedicated trade association. Currently Kuyumcukent, with around 2,500 shops and production centers, is the largest integrated goldsmith center in the world. In addition, the industry focused on skill development in design by offering multiple vocational courses across its state and through private universities.
The government must play an active role in facilitating the required infrastructure to achieve the $60 billion goal and this can only happen through encouraging incentives and subsidies. “There needs to be some kind of compulsion from the government to not export raw materials. Some sort of incentive should be given to those who export jewellery and not just diamonds. And some form of duty must be charged on those who are exporting colour gemstones in a packet. Then, in 10 years we will see what marvelous performance Indian jewellers will give you,” predicts Parekh.